Plaintiffs are various taxpayers, includ╜ing five individuals and a corporation, who filed a Complaint on September 2, 1999 1 alleging that the Internal Revenue Service ("IRS") made unauthorized disclosures of Plaintiffs' tax information in violation of 26 U.S.C. ╖ 6103. Plaintiffs also allege that the IRS acted willfully and with gross negligence, entitling Plaintiffs to punitive damages pursuant to 26 U.S.C. ╖ 7431. In its Answer, Defendant admits that Special Agent Greg Heck made an unauthorized disclosure of Plaintiffs' tax information at a retirement party held in Heck's honor on October 24, 1998. It is undisputed that approximately 100 people attended the party, which included a "roast" of Heck. In connection with the roast, Heck made ref╜erence to the then-ongoing investigation by the IRS of Plaintiffs' tax practices. 2

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1. Plaintiffs filed an Amended Complaint on July 26, 2000.

2. Plaintiffs Zariq Siddiqui, Joseph Vullo, and Richard Vullo were indicted for tax evasion on August 6, 2001. After entering plea agreements, each was sentenced on October 22, 2001 to approximately sixteen months in pris╜on and fined $5000. The present action was stayed pending resolution of these criminal proceedings. The stay was lifted on Novem╜ber 9, 2001.

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Discussion

In their Motion for Partial Summary Judgment, "[e]ach Plaintiff contends that he or she is entitled to $1,000 for the disclosures made to each of the 100 per╜sons at the retirement party." (Mot. at 7). Defendant, however, contends that "each Plaintiff may recover a total of $1,000, as [Heck] committed only one 'act.' " (Opp'n at 7). In short, Plaintiffs argue that they are entitled to a total of $600,000 in statutory damages pursuant to ╖ 7431; Defendant argues that Plaintiffs are only entitled to $6,000 as a result of the unauthorized disclosure.

In its Motion for Partial Summary Judg╜ment, Defendant contends that Plaintiffs cannot recover punitive damages pursuant to ╖ 7431(c) because Plaintiffs have nei╜ther sustained nor alleged actual damages. Plaintiffs admit that they have not sus╜tained actual damages as a result of De╜fendant's unlawful disclosure, but contend that they may nevertheless recover puni╜tive damages under ╖ 7431.

I. LEGAL STANDARD

This Court may grant summary judg╜ment if it finds there is "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Where, as here, the parties are in essential agree╜ment about the facts giving rise to their dispute, "a motion for summary judgment is appropriate because [the parties] raise[ ] questions of law, the resolution of which does not involve disputed 'material' facts." Delbon Radiology v. Turlock Diagnostic Ctr ., 839 F.Supp. 1388, 1391 (E.D.Cal. 1993); see also Edwards v. Aguillard, 482 U.S. 578, 591, 594, 107 S.Ct. 2573, 96 L.Ed.2d 510 (1987) (stating that interpretation of a statute is appropriate for sum╜mary judgment based on the text of the statute and/or its legislative history).

II. ANALYSIS

A. Statutory Damages

Section 6103 provides that, with limited exceptions, "no officer or employee of the United States .. . shall disclose any [tax] return or return information." 26 U.S.C. ╖ 6103(a)(1). "Return information" in╜cludes "whether the taxpayer's return was, is being, or will be examined or subject to other investigation." ╖ 6103(b)(2)(A). In the absence of actual damages, ╖ 7431 pro╜vides statutory damages for unauthorized disclosure of tax return information in the amount of "$1,000 for each act of unautho╜rized disclosure of a return or return infor╜mation with respect to which [a] defendant is found liable." 26 U.S.C. ╖ 7431(c)(1)(A). "The term 'disclosure' means the making known to any person in any manner what╜ever a return or return information." ╖ 6103(b)(8).

Here, Plaintiffs contend that because Heck disclosed the fact that Plaintiffs were under investigation to a room full of 100 people, Defendant is liable for 100 sepa╜rate acts of disclosure as to each Plaintiff. Plaintiffs rely on Mallas v. United States, 993 F.2d 1111 (4th Cir.1993), in support of their position.

In Mallas , a confidential IRS report ("RAR") was mailed to thirty-three cou╜ples at thirty-three addresses and to seven other individuals in violation of ╖ 6103. Rejecting the defendant's argument that the mailings constituted only forty acts of disclosure (i.e., one for each RAR mailed), the Fourth Circuit calculated seventy-three separate acts of disclosure:

[T]he act to be counted for computing damages is the "making known to any person in any manner whatever" the return information. Each time the Gov╜ernment "makes known" return informa╜tion to a person in violation of section 6103, it has committed an "act of unauthorized disclosure." ..: If the IRS addresses and mails a single RAR to two people, it makes the information known to each of them no differently than if it had decided to use two copies of the RAR, two envelopes, and two stamps. Nothing in the language of the statute suggests that Congress means to reward the IRS, having been found lia╜ble for violating section 6103, for the fortuity of having multiple investors liv╜ing under one roof.

Id. at 1125. Similarly here, according to Plaintiffs, "the IRS should not be reward╜ed because special agent Heck fortuitously made the wrongful disclosure to 100 per╜sons in the same room instead of making the disclosures to 100 persons in separate rooms." (Reply at 4).

For its part, Defendant primarily relies on Miller v. United States, 66 F.3d 220 (9th Cir.1995), and Ward v. United States, 973 F.Supp. 996 (D.Colo.1997). In Miller, the Ninth Circuit determined that an un╜authorized disclosure by an IRS agent to a newspaper reporter, who subsequently published the information, constituted a single "act" of disclosure warranting only $1,000 in statutory damages. The Ninth Circuit rejected the taxpayer's argument that she was entitled to $1,000 in damages for each subscriber of the newspaper. The court noted "the public policy reason for not allowing this form of second party dissemination to be actionable," observing that "one statement on the worldwide com╜puter network or to a television reporter could result in disseminations that could break our nation's treasury." Id. 224-25.

Although factually distinguishable, Miller establishes the principles that gov╜ern in the present case. First, Miller emphasizes that public policy consider╜ations, especially the potential drain on "our nation's treasury," militate against the award of high statutory damages. Miller, 66 F.3d at 223-24. Noting that the taxpayer's original claim sought "$1.1 bil╜lion in damages representing the paper's total circulation multiplied by $1,000," the court observed that "[i]n a case involving no actual damages, such a prayer gives new meaning to 'overreaching,'" 3 Miller, 66 F.3d at 224. Second, in rejecting liabil╜ity for second-party dissemination, the Ninth Circuit implicitly rejected the Fourth Circuit's expansive construction of ╖ 6103, which counts as a discrete "act" of disclosure every instance in which another person learns of a taxpayer's return infor╜mation. See Mallas, 993 F.2d at 1125 ("Each time the government 'makes known' return information . . . it has com╜mitted an 'act of unauthorized disclo╜sure.' "). The Mallas court's interpreta╜tion is thus inconsistent with the Ninth Circuit's rejection of liability for second╜party dissemination. Indeed, though the unauthorized disclosure of tax information "to a person who is likely to publish that information" represents a particularly ef╜fective means of "making known" confi╜dential tax information, the Ninth Circuit determined that not every instance of dis╜closure constitutes a discrete "act" for the computation of damages. Miller, 66 F.3d at 223-224. Rather, "the disclosure of in╜formation to a person who is likely to publish that information is relevant in determining the degree of negligence or recklessness involved, not the number of disclosures. " Id. at 225 (emphasis added).

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3. Although the taxpayer's original request for relief was based on the newspaper's total circulation, she amended her request when she learned that the unauthorized disclosure was only included in the paper's "Valley Edition" with a circulation of 181,734. Notably, the Ninth Circuit articulated its public policy ra╜tionale, in terms of the threat to the nation's treasury, in the context of a claim for only $181,734.

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In Ward, the court similarly rejected an award of damages based on the number of people to whom the tax information was made known, concluding that unauthorized disclosures by two IRS agents during a radio program constituted two acts of dis╜closure regardless of the size of the listen╜ing audience. The court rejected "the po╜sition that there was an act of disclosure for each listener," finding that such an argument "improperly focuses on the audi╜ence that heard or received the unautho╜rized disclosure." Ward, 973 F.Supp. at 1003. According to the court, under ╖ 7431, "[i]t is the act of disclosure that triggers and defines liability, not the ex╜tent or scope of the disclosure." Id. "To accept Plaintiffs argument would require this Court to give no effect to the word 'act' as used in ╖ 7431(c)(1)(A), thus violat╜ing a cardinal rule of statutory interpretation." Id. Although the taxpayer attempt╜ed to distinguish Miller on the grounds that a radio broadcast does not involve second-party dissemination, the court found "that the medium or manner by which the information is disseminated is immaterial for purposes of determining the 'acts' of disclosure pursuant to ╖ 7431." Id. 4

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4. The Ward court distinguished Mallas on the grounds that in Mallas, "Defendant commit╜ted 73 different 'acts' by addressing and plac╜ing in the mail envelopes that were addressed and directed to seventy-three individuals. Thus, Defendant committed seventy-three sep╜arate 'acts' of disclosure." Ward, 973 F.Supp. at 1003. The court also stated that "to the extent that Mallas could be interpret╜ed as holding that an act of disclosure is committed for every person who learned about Plaintiff's return information, as a con╜sequence of [the agents'] act of appearing on the radio, this Court disagrees with such an analysis." Id. at 1003-04.

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In the present case, the Miller principles defeat Plaintiffs' claim for $600,000 in statutory damages. First, like the taxpayer in Miller, Plaintiffs sustained no actual damages. Accordingly, their prayer for $600,000 in statutory damages is similarly "overreaching." Miller, 66 F.3d at 224. Moreover, awarding such extensive damages under the present cir╜cumstances would not only strain "our na╜tion's treasury," id . at 225, it would grant Plaintiffs an unjustified windfall. 5 Cf. Frank Music Corp. v. Metro-Goldwyn-Mayer Inc., 886 F.2d 1545, 1554-55 (9th Cir.1989) (declining to award statutory damages under the Copyright Act because to do so "effectively would grant plaintiffs a windfall"). Although the extent of the disclosure may be relevant in determining Plaintiffs' actual damages, or "the degree of negligence or recklessness involved," it is not relevant in determining "the number of disclosures." Miller, 66 F.3d at 225.

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5. Plaintiffs contend that "the IRS should not be rewarded because special agent Heck fortuitously made the wrongful disclosure to 100 persons in the same room instead of making the disclosures to 100 persons in separate rooms." (Reply at 4). In this case, Plaintiffs provide no basis for concluding that Heck's single disclosure was fortuitous in this sense, or that he would have made 100 separate wrongful disclosures if the partygoers had not been assembled in a single room. In Mallas, by contrast, the IRS specifically intended to reach all seventy-three addressees regardless of whether some of them "fortuitously" lived at the same address. Moreover, Miller makes clear that the number of persons who ulti╜mately receive the information does not deter╜mine "the number of disclosures." Miller , 66 F.3d at 224.

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Second, though Heck's unautho╜rized disclosure "made known" Plaintiffs tax information to 100 people, "[i]t is the act of disclosure that triggers and defines liability, not the extent or scope of the disclosure." Ward, 973 F.Supp. at 1003; see also Miller, 66 F.3d at 224 ("The dis╜trict court correctly limited the IRS's dam╜ages for unauthorized disclosure to $1,000 for [the agent's] single statement to the Los Angeles Times, Valley Edition.") (em╜phasis added). Thus, limiting Plaintiffs to statutory damages for Heck's single state╜ment is consistent with the Ninth Circuit's determination that "disclosure" is con╜strued with reference to the defendant's "act," not the number of persons to whom the information is made known.

Here, Defendant contends that because Plaintiffs have not sustained any actual damages, they cannot recover punitive damages under ╖ 7431(c). According to Defendant, "[w]hen a plaintiff has not sus╜tained any actual damages, Congress has limited that plaintiff's recovery to statuto╜ry damages under ╖ 7431(c)(1)(A)." (Mot. at 7). "Had Congress intended to waive immunity to permit taxpayers who had not sustained actual damages to recover puni╜tive damages, it would have said so, clearly and unambiguously." (Id.).

Plaintiffs concede that they have not sustained any actual damages as a result of the unauthorized disclosure of their tax information. (See Resp. at 2). However, Plaintiffs contend that the statutory language supports an award of punitive damages even in the absence of actual damages. (Resp. at 2). Because subsection (B)(1) provides for "the sum of" actual damages "plus" punitive damages, Plaintiffs argue that even if "actual damages are zero and there are punitive damages, 'the sum of' means the zero plus 'X', the amount of punitive damages." (Id. at 4). Plaintiffs also rely on Mallas and various cases in which courts have awarded punitive damages despite the absence of actual damages.

The Ninth Circuit has not ad╜dressed "whether ╖ 7431 punitive damages can apply where there are no actual dam╜ages." Miller, 66 F.3d at 224. However, the structure of ╖ 7431(c), together with this Court's clear mandate to construe nar╜rowly waivers of sovereign immunity, establish that punitive damages are not available under ╖ 7431(c) absent a showing of actual damages. Accord Barrett v. United States, 917 F.Supp. 493, 504 (S.D.Tex.1995) ("The very language and structure of the statute ... mean that punitive damages are recoverable only when actual damages have been proved."); Smith v. United States, 730 F.Supp. 948, 955 (C.D.Ill.1990), rev'd on other grounds, 964 F.2d 630 (7th Cir.1992) ("[T]he clear language of the statute provides that when a taxpayer only recovers statutory dam╜ages, punitive damages are unavailable to him."); William E. Schrambling Accoun╜tancy Corp. v. United States, 689 F.Supp. 1001, 1008 (N.D.Ca1.1988), rev'd on. other grounds, 937 F.2d 1485 (9th Cir.1991) (holding that a plaintiff that has not proved actual damages is not entitled to punitive damages).

Section 7431(c) provides that a taxpayer may recover either $1,000 for an unautho╜rized disclosure, or, the sum of actual dam╜ages "plus," where appropriate, punitive damages. In Mallas, the Fourth Circuit determined that "a taxpayer may recover punitive damages, even where actual dam╜ages are zero." Mallas, 993 F.2d at 1126. Similarly, Plaintiffs argue that "[t]he word 'plus' is critical in the statutory interpreta╜tion," because "the sum of' actual and punitive damages allows for the possibility that actual damages may be zero. (Resp. at 4). In Plaintiffs' formulation, where X = punitive damages: 0 + X = X.

In reaching this conclusion, nei╜ther Plaintiffs nor the Fourth Circuit ad╜dress the fact that their interpretation of ╖ 7431 achieves, at best, an ambiguous waiver of sovereign immunity with respect to the availability of punitive damages in the absence of actual damages. Tradition╜al tort principles, however, link an award of punitive damages to a showing of actual damages. See BMW of N . Am., Inc. v. Gore, 517 U.S. 559, 580, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996) ("The principles that exemplary damages must bear a 'reason╜able relationship' to actual damages has a long pedigree.") (citing cases). 6 Against this common law backdrop, Plaintiffs' in╜terpretation of ╖ 7431 enlarges the waiver of sovereign immunity "beyond what the [statutory] language requires." Nordic Village, Inc., 503 U.S. at 33-34, 112 S.Ct. 1011. Under these circumstance, because ╖ 7431 lacks an unequivocal waiver for punitive damages in the absence of actual damages, the expansive waiver urged by Plaintiffs cannot be justified. See United States Dep't of Energy, 503 U.S. at 627, 112 S.Ct. 1627.

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6. Plaintiffs are correct in observing that state law does not determine the availability of punitive damages under ╖ 7431. ( See Resp. at 9). However, the principle that punitive damages cannot be awarded in the absence of actual damages is a matter of common law generally, not unique to Arizona. See, e.g., Martini v. Fed. Nat'l Mortgage Ass'n, 178 F.3d 1336, 1350 (D.C.Cir.1999); Belleville v. Davis, 262 Or. 387, 498 P.2d 744, 752 (1972); 1488, Inc. v. Philsec Inv. Corp., 939 F.2d 1281 (5th Cir.1991) (Texas law); Guar. Serv. Corp. v. American Employers' Ins. Co., 893 F.2d 725 (5th Cir.1990) (Miss.law); Richard v. Hunter, 151 Ohio St. 185, 85 N.E.2d 109, 110 (1999). Although Congress is free to reject the com╜mon law in enacting a statute, in the context of sovereign immunity, it must do so unam╜biguously. As discussed above, ╖ 7431 does not unambiguously waive sovereign immunity with respect to punitive damages in the absence of actual damages. Moreover, the lim╜ited waiver of sovereign immunity in ╖ 7431 distinguishes the cases cited by Plaintiffs in which punitive damages were awarded de╜spite the absence of actual damages. See, e.g., Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970): Basista v. Weir, 340 F.2d 74 (3d Cir.1965). In these cases, because plaintiffs brought causes of action against state officials pursuant to 42 U.S.C. ╖ 1983, sovereign immunity was not in issue. Finally, Plaintiffs' reliance on Basista is misplaced. In Basista, the court noted that a plaintiff need not allege even nominal dam╜ages for the violation of a federal right be╜cause the damage is evidenced by the viola╜tion itself. Here, by contrast, Congress has expressly made provision for nominal dam╜ages in ╖ 7431 and, at the same time, express╜ly coupled punitive damages with actual dam╜ages.

IT IS FURTHER ORDERED that De╜fendant's Motion for Partial Summary Judgment Re: Punitive Damages (Doc. # 56) is GRANTED .

IT IS FURTHER ORDERED that a Final Pretrial Conference is set for Octo╜ber 18, 2002 at 1:30 p.m. The parties shall file a Joint Proposed Pretrial Order by September 18, 2002. All Motions in Li╜mine are to be filed at the time of filing the Joint Proposed Pretrial Order. Responses to the Motions in Limine are due within ten days from the receipt of the Motions. No replies will be filed.